Tax Talk: IRS Issues Important Updates for 2015

Tax Talk

The IRS has recently issued a few new updates all practitioners and small business owners will be interested in.

First, the bad news…the social security wage base will be $118,500 in 2015, up from $117,000 in 2014. This is the ‘FICA’ or Social Security tax withheld from wages. The applicable rate for FICA wages remains at 6.2%.

Now, for some better news, let’s turn to the retirement front.

Elective deferrals for 401(k) plans increase to $18,000 in 2015 (up from $17,500 in 2014). The catch-up contribution for those over age 50 increases to $6,000, up from $5,500 in 2014.

Elective deferrals for SIMPLE plans increase to $12,500 in 2015, up from $12,000 in 2014.

The limitation for defined contribution plans (for instance, SEPs or 401(k) plans) is increased in 2015 from $52,000 to $53,000. Accordingly, the annual compensation limit has been increased from $260,000 to $265,000.

The maximum amount for IRA and Roth IRA contributions remains the same at $5,500 for 2015 ($6,500 if you’re age 50 or older).

With the elections coming this week, tax legislation is assured to heat up. Stay tuned.